Does this apply to my association?
Civil Code § 5806 applies to associations governed by the Davis-Stirling Common Interest Development Act. It has no unit-count or funds-handling trigger.
What coverage does my association need?
HOA requirements
Planned-development HOA
- Does this apply to my association?
- An association governing a planned-development common-interest development under Davis-Stirling.
- How much coverage do I need?
- At least association reserves + the total amount of assessments for three months. Governing documents may require a greater amount.
- What should I prepare?
- The law does not say which reserve date to use, how to measure three months of assessments, or when to update the amount. Ask the association for its current reserves, assessments, and policy wording.
- Who and what must coverage include?
- Directors, officers, and employees are covered. Computer fraud and funds-transfer fraud must have the same limit. If used, the managing agent or management company and its employees must be covered for dishonest acts.
- Are there exceptions or waivers?
- No member waiver. Self-insurance does not satisfy the statute. Governing documents may increase but not reduce the minimum.
- When do I need coverage?
- The association must continuously maintain coverage. The statute does not set a policy term, a date for measuring the amount, or an update schedule.
- What records do I need?
- No state filing is prescribed. The annual budget report sent 30–90 days before fiscal year-end must summarize insurer, coverage type, limit, and deductible or include the declaration page.
Condominium requirements
Condominium association
- Does this apply to my association?
- An association governing a condominium common-interest development under Davis-Stirling. The same rule applies with no unit-count trigger.
- How much coverage do I need?
- At least association reserves + the total amount of assessments for three months. Governing documents may require a greater amount.
- What should I prepare?
- The law does not set dates for measuring reserves or assessments or specify the exact wording for equivalent coverage. Review the current budget and policy.
- Who and what must coverage include?
- Directors, officers, and employees are covered. Computer fraud and funds-transfer fraud must have the same limit. Coverage also includes dishonest acts of a managing agent or management company and its employees.
- Are there exceptions or waivers?
- No member waiver and no self-insurance option.
- When do I need coverage?
- Coverage must be maintained continuously. The law gives no renewal or formula-update schedule.
- What records do I need?
- Keep policy information for the annual budget report disclosure required by Civil Code § 5300.
How do I prepare to buy?
Confirm the community is governed by the Davis-Stirling Act and check governing documents for a higher limit.
Add current association reserves to three months of total assessments.
Check that directors, officers, employees, the management organization, computer fraud, and funds-transfer fraud are covered at the required limit.
Retain the declarations and include the required policy summary in the annual budget report.
Common Questions
May California owners waive the requirement?
No. Section 5806 provides no owner waiver, and self-insurance does not qualify.
Must a management company be covered?
Yes. When one is used, coverage must include or be endorsed for dishonest acts of the managing agent or management company and its employees.
How often should the amount be recalculated?
The law requires continuous coverage but sets no update schedule. Recheck when reserves, assessments, or the budget materially change.
Calculate coverage and read the law
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